Governance & Climate Justice

Globalization, consumption and industry production leveraged pressure on contemporary society. Today’s most pressing social dilemmas regarding climate change demand for inclusive solutions. Understanding the bounds of environmental limits helps avoiding ethical downfalls beyond the control of singular nation states. Combating environmental degradation infringing on intergenerational equity—the fairness to provide an at least as favorable standard of living to future generations as enjoyed today—has become a blatant demand. In a history of turning to natural law as a human-imbued moral compass for solving societal downfalls on a global scale in times of crises, this book covers environmental constraints in light of climate change demanding for climate justice attention around the globe. The first part of the book concerns the quest for intergenerational equity in the twenty-first century. The theoretical frame introduces the human natural drive towards intergenerational fairness underlying contemporary environmental justice demands. The second part presents climate justice within a society, around the world and over time. An empirical model highlights economic growth perspective differences around the world under climate change in order to derive inferences how to redistribute the unequal gains and losses of a warming globe. The third part provides economic and financial foundations of wealth stemming from nature. Concrete examples for integrating environmental conditions in contemporary macroeconomic models and financial forecasting strategies will be given. The discussion closes with climate justice-based governance and private sector solutions to address rising environmental conscientiousness importance within society and around the world.

The idea of intergenerational equity is as old as humankind. Intergenerational equity arises from the elderly wanting their offspring to prosper in at least as favorable conditions as experienced. The natural behavioral law of intergenerational equity was lived for centuries and transpired in the social compound as practiced in ancient, traditional customs ever since. Intergenerational equality is grounded on a human-imbued wish for fairness as there is an ethical preference for fair welfare distribution among different generations. Acknowledging intergenerational equity as a natural behavioral law may serve as a legal basis for the codification of human rights of intergenerational equity. A pro-active overcompliance with contemporary sustainability legislation may stem from a broader social contract within society to incorporate novel responsibilities and embrace discretionary activities that contribute to societal welfare and the well-being of future generations. Globalization increasing internationalization of public and private concerns creates a need for an international outlook of intergenerational equity in order to solve global common goods predicaments and draw inferences on the harmonization of intergenerational justice on a global scale in the age of climate change.

Global responsible intergenerational leadership is introduced by mapping the social representations of intergenerational imbalances in the age of climate change. The multi-faceted investigation of intergenerational equity serves the greater goal to ensure justice as a responsibility for the future. Social representations on intergenerational equity featured notions of ecologic decline related to climate change and unsustainable consumption. Climate change was found to be considered as a major future external influence on humankind. Stakeholder views of intergenerational equity included environmentalism on public officials’ and international organizations’ agendas. Politicians connected intergenerational justice to human rights. Promoting solidarity, ethicality and social responsibility but also innovations and future investment implement intergenerational equity. Long-term solutions may stem from institutional regulation and foresighted taxation but also open debates informing global leaders about complex intertemporal frictions.

A warming earth under climate change determines current and future generations’ living conditions. Environmental economics with particular attention to climate justice as the wish for everyone to enjoy a benevolent environment is based on ethical imperatives and economic calculus laying the foundation to protect climate-disadvantaged current world inhabitants and future generations. Justice and fairness underline inequality alleviation via economic redistribution within society, inbetween the entire world countries community, and over generations.

Global inequalities due to climate change currently herald a call for climate justice as the right of fairness for everyone to a favorable climate. Fair climate stability implementation strategies that support the current endeavor to finance climate change mitigation and adaptation around the globe are proposed in a three-dimensional climate justice approach to share the benefits and burden of climate change fair within society. First, climate justice within a country should pay tribute to the fact that low- and high-income households share the same burden proportional to their income. Secondly, fair climate change burden sharing between countries comprises of argumentations that those countries benefiting more from a warming climate should also bear a higher burden of enabling climate change mitigation and adaptation efforts. Building on common and international law, countries with better means of protection or conservation of a favorable climate should face a greater responsibility to protect the earth. Thirdly, climate justice over time is proposed in an innovative climate change burden sharing strategy. Taxation and climate bonds are introduced as redistribution scheme to support those parts of the world that have run out of economically-favorable climate already. Climate bonds are an innovative strategy to share the economic burden of transitioning to renewable energy solutions as well as the costs of adapting to a warming globe between countries and generations. Climate bonds help weight climate change expenses more equally between today’s and tomorrow’s society. Overall, the book offers macroeconomic models to estimate future economic growth prospects in light of climate change to find innovative redistribution schemes to spread the expected short-term gains from climate change in order to offset for losses from a warming earth around the globe. Deriving respective policy recommendations for the wider climate change community is aimed at ensuring to share the burden but also the benefits of climate change within society, between countries and over time in an equitable and fair way. The presented thoughts are meant as a first preliminary step to inspire innovative climate protection incentives from a welfare redistribution perspective to ensure fair and sustainable living conditions for all countries around the world in this generation and the following.

Based on the optimal temperatures for the agriculture, industry and service sectors productivity as well as climate projections of the year 2100 under the business as usual path per country, this chapter reveals economic climate winners and losers around the world from now on until the year 2100. Taking a GDP perspective in a simplified model to extend, the world will macroeconomically benefit more from climate change until 2100 than lose. Winning and losing from a warming earth is significantly positively correlated with the Paris COP 21 emissions country percentage of Greenhouse Gas (GHG). The chapter concludes with introducing the climatorial imperative—advocating for the need for fairness in the distribution of the global earth benefits among nations based on Kant’s imperative to only engage in actions one wants to experience being done to oneself. This simplified model to measure the economic short-term gains and losses from climate change is the basis for a refined model presented in the following chapters factoring in risk propensities around the world under global warming. The following model also serves as the basis for redistribution strategies presented in subsequent chapters.

Climate justice accounts for the most challenging global governance goal. In the post-COP21 Paris agreement climate change mitigation and adaptation efforts, the financialization of the ambitious goals has leveraged into a blatant demand. Following the introduction of the gains from climate change, this chapter proposes a model to distribute the benefits of a warming earth in a fair way based on which countries are losing and which countries are winning from a warming earth until 2100. A macroeconomic cost-benefit analysis thereby aids to find the optimum solution on how to distribute climate change benefits and burden within society. When unidimensionally focusing on estimated GDP growth given a warmer temperature, over all calculated models assuming linear, prospect or hyperbolic gains and losses, the world will be gaining more than losing from a warming earth until 2100. Based on the WL index of 188 countries of the world, less countries (n=78) will gain more from global warming until 2100 than more countries (n=111) will lose from a warming earth. Based on the overall climate change winners and losers index factored by GDP per inhabitant, global warming benefits are demanded to be redistributed in a fair way to offset the costs of climate change loser countries for climate change mitigation and adaptation efforts and to instigate a transition into renewable energy. Adding onto contemporary climate fund raising strategies ranging from emissions trading schemes (ETS) and carbon tax policies as well as financing climate justice through bonds as viable mitigation and adaptation strategies, climate justice is introduced to comprise of fairness between countries but also over generations in a unique and unprecedented tax-and-bonds climate change gains and losses distribution strategy. Climate change winning countries are advised to use taxation to raise revenues to offset the losses incurred by climate change. Climate change losers could raise revenues by issuing bonds that have to be paid back by taxing future generations. Regarding taxation, within the winning countries, foremost the gaining GDP sectors should be taxed. Climate justice within a country should also pay tribute to the fact that low- and high-income households share the same burden proportional to their income, for instance enabled through a progressive carbon taxation. Those who caused climate change could be regulated to bear a higher cost through carbon tax in combination with retroactive billing through a corporate inheritance tax to map benefits from past wealth accumulation that potentially contributed to global warming. Deriving respective policy recommendations for the wider climate change community in the discussion of the results is aimed at ensuring to share the burden but also the benefits of climate change within society in an economically efficient, legally equitable and practically feasible way.

Climate change financialization demands for urgent action of the global community and an innovative solution. The economic impact of climate change on the world will have national differences in Gross Domestic Product (GDP) prospect under climate change around the world. Redistribution of some of the expected gains enacted by a taxation-and-bonds strategy are proposed in this chapter. A fair redistribution of relative short-term economic gains under global warming is envisioned in order to offset for economic losses based on economic, ecologic, historic, and political factors. The model determining redistribution patterns throughout the world is based on the geo-impact of climate change, the financial crisis resilience capabilities as well as the global connectivity and science diplomacy leadership of a country. Empirically, nine indices determine which countries should be using a taxation strategy and what countries should be granted climate bonds premiums in order to enact a fair redistribution between countries. The proposed taxation-and-bonds strategy could aid a broad-based and long-term market incentivization of a transition to a clean energy economy. The discussion features the implications of the proposed strategy, implementation details and the economic impetus of redistribution mechanisms. The monitoring, evaluation and accountability control of the outlined plan are thematized in the estimation of the feasibility and limitations. Future research and outlooks on the redistribution via taxation-and-bonds strategy are provided.

Climate change gains transfer are meant not only to compensate for losses in global warming losing territories but also to finance incentives for a transition to renewable energy. In order to manifest the established facts that some parts of the world will be gaining from a warming earth and others losing from climate change, the following chapter investigates climate-induced migration streams and financial flows. Based on a 187 country-strong dataset and under the implicit assumption of an open economy, a significantly positive inflow of migrants was found into the climate change winner countries. A statistically significant correlation outlines a positive Foreign Direct Investment (FDI) remaining financial inflow into the winning countries. As a cross validation of the finding of financial inflows into climate change winner countries, a non-significant correlation and independent t-test reveal that there are no significant financial returns in form of remittances to the climate change loser countries, which highlights that the money transfer into winning countries is only one sided and not reversed by remittances. The results target at underlining the importance of climate change benefits transfers to offset the losses incurred in the global warming-burdened areas of the world.

The presented economic impact of climate change suggests that all three Gross Domestic Product (GDP) pillars of the agriculture, service and industry sectors will be affected by global warming in terms of productive feasibility and performance. As the temperature is expected to be rising, we may therefore see a shift from industry production focus with lowest optimum temperature to service sector activities with medium peak cardinal temperature and then agriculture sector productivity focus with the highest optimum temperature as recalculated by a meta-analysis of literature sources. Overall, the literature meta-analysis results outline that the peak condition for happiness at 14 °C has passed when considering the world mean temperature of 18.6 °C (65 °F). In addition, the peak condition for workplace temperature has passed when measured by the world mean temperature of 18.6 °C (65 °F). Heat waste production is prospected to become a luxury good in the future; as well all winter-sports-related activities. When it comes to safety, Legionella bacteria in the water will soon become a problem. Medical and hygiene markets are at risk to be affected by bacteria contamination. The results have implications for global warming mitigation and adaption strategies as well as hold invaluable novel insights for the implementation of a transition into renewable energy.

The contemporary attention to global warming and climate shocks is assumed to affect the price expectations and hence actual market prices of commodities. Paying attention to supply and demand side perspectives, inflated prices surrounding scarcity will be first modelled and then back-tested on data about commodity prices in food and beverages. Contemporary geopolitical tensions around the world are found to have an impact on commodity prices as well. Future wealth of nations will be introduced by the concept of climate flexibility defined as the range of temperature variation of a country. So far, a broad spectrum of climate zones has not been defined as an asset but climate change will require territories being more flexible in terms of changing economic production. The more climate variation a nation state possesses, this chapter argues, the more degrees of freedom a country has in terms of GDP production capabilities in a differing climate. These preliminary insights aid in answering what financial patterns can we expect given predictions the earth will become hotter. Already now this chapter presents human capital flows and financial market inflows into areas that are winning economically from a warming globe. The degree of climate flexibility is found to be related to human migration inflow.

A broad spectrum of climate zones has never been defined as asset and comparative edge in free trade—but climate change will require territories being more flexible in terms of changing economic production. The more climate variation a nation state possesses, this chapter argues, the more degrees of freedom a country has in terms of GDP production capabilities in a differing climate. Future wealth of nations is introduced by the concept of climate flexibility defined as the range of temperature variation of a country. In a changing climate, temperature range flexibility is portrayed as a future asset for international trade of commodities. Climate flexibility is viewed as a production flexibility driver leading to comparative advantages of countries. These preliminary insights aid in answering what financial patterns can we expect given predictions the earth will become hotter. Already now, the degree of climate flexibility is found to be related to human migration inflow. In the future, climate flexibility is predicted to determine future climate wealth of nations in a climate changing world. The previously defined climate change winner and loser index will be blended with the novel insights on climate flexibility, leading to an unprecedented outlook on future climate wealth of nations. Lastly, future climate change induced market changes are pegged to scarcity of agriculture production and a prospect of commodity price spikes is given.

In previous chapters (see, for example, Chapter 6), a macroeconomic model was presented that estimates a Winner-Loser index per country by calculating deviation from the optimum temperature for agriculture, industry, and service sectors, weighting that deviation by the sector's share of GDP, and aggregating the weighted deviations into an international index.

This chapter discusses the most recent trend developments in capturing natural resources in economic sciences. ‘Wealth of Nature’ features a forward-looking account of contemporary attempts to quantify the economic value of nature and environmental preservation. Historical insights feature the legacy of the U.S. inception of the Environmental Protection Agency (EPA) in the 1970s that started to estimate the economic impetus of every environmental policy. Europe has a long-standing tradition to consider environmental aspects in economic productivity calculus—for instance—if one considers projects like the wider ‘Green Wave’ endeavors that tact economic flows in harmony with environmental conditions. Under the Joseph Biden administration the U.S. started the Green New Deal (GND). The European pendant is the European Green Deal (EGD) that incorporates green policies in every aspect of the governance of economic growth. In particular, the Next Generation European Union Sustainable Finance Taxonomy is measuring the economic impact of all major productivity sectors of the economy. The New European Bauhaus integrates sustainable and inclusive living in every aspect of human lives. The U.S. President Joseph Biden administration has launched a large-scale plan to bring nature into economics and assess changes in environmental and ecosystem services in cost–benefit analyses. The U.S. initiative to create environmental-economic statistics targets at measuring natural resources as economic assets. Modern satellite imagery empowering the Geographic Information System (GIS) advancements and geo-engineering are additional scientific advancements to cartograph and change natural conditions for economic outcomes. While the Donald Trump administration is pushing for efficiency in governmental endeavors, the corporate and finance world is taking over environmental concerns. In the finance and governance worlds, Environmental, Social, and Governance (ESG) investment strategies have leveraged into a worldwide trend in most recent decades. In addition, the International Monetary Fund’s research unit investigates regional climate change economic impacts. Scientific advancements, like the Columbia University-housed Mapping Climate Justice project, calculates the expected economic changes due to climate change. On the global level, the World Bank’s Changing Wealth of Nations Report integrates natural resources and greenhouse gas emissions into international accounting. The Global Green New Deal (GGND) integrates many different sustainability aspects in industrial economic action and human living. The ambitious United Nations Sustainable Development Goals (SDGs) round up the overarching environmental economics endeavors on the global stage. In their entirety, all these initiatives and efforts echo an appreciation of environmental protection in harmony with economic activity. In a climate of geopolitical tensions, it is to note that future wealth of nations can be based on the conservation of natural resources. Climate flexibility and environmental stability are key comparative advantages that countries can ground their economic prosperity on. In the eye of global warming, the age of wealth in nature is born indicating growing need to consider natural environments for strategic partnerships and alliances.